Forex Blog - FX Briefing - Growth concerns put dollar under pressure

Â·Inflation rates
in the eurozone set to hit record highs, growth outlook gloomier

Growth concerns put dollar under
pressure

During
the course of the week, the dollar lost ground across the board again. Towards
the end

of
the week, EUR-USD was around 1.5750. The US
currency did not fall all that sharply compared to the previous week, but it is
now nearing the â€śupper limitâ€ť of the trading range over the last few months
again. USD-JPY remained relatively firm, dropping to under 107. In contrast,

EUR-JPY
gained more ground: during the course of the week, the European currency rose
to169.46, â€“ a new record high against
the yen.

The
fresh bout of depreciation was triggered by the Open Market Committeeâ€™s
statement on Thursday. According to the Fedâ€™s latest risk assessment, the
balance of risks has shifted towards inflation risks, but only slightly.
Furthermore, in its description of the risks, the Committee was non-committal:
uncertainty about the inflation outlook had increased, but inflation was
expected

to
moderate later this year. Consequently, the statement contained no indication
of an imminent interest rate rise, apart perhaps from one single vote: Dallas
Fed president Richard Fisher was in favour of raising the fed funds rate.

The
Fedâ€™s relatively dovish stance is, however, in line with market participantsâ€™
mood. Up until

recently,
soaring energy and commodity prices and accelerating inflation in their wake
had been regarded predominantly as a challenge for monetary policy. Thus the
increase in oil prices went hand in hand with interest rates hikes. But the higher
the oil price climbs, the more the growth risks come to the fore.

The
price shock caused by rising energy and commodity prices together with the
financial

shock
emanating from the credit crisis are having a dangerous contractive impact. On
the one hand, there are stricken banks, whose scope to act is limited due to
asset writedowns and functional disruptions in important market sectors. The banks
are passing the buck to their customers by tightening financing requirements
and credit conditions for consumers and companies alike. On the other hand,
there are companies and households deep in debt; because of the soaring energy
and commodity prices, they are forced to cut back their costs and limit their
spending.

Towards
the end of the week, the oil price (WTI front contract) rose to over $141 per
barrel. Several factors were responsible for this: production shortfalls in Nigeria
due to strikes, the OPEC president predicting that the oil price would rise to
$170/b in summer, and Libya
threatening to reduce output. This price surge and a spate of negative news
from the financial sector probably contributed to the slump in equity markets â€“
during the course of the week, the Dow Jones fell by about 5%. Despite the fact
that the oil price is still rising, interest rate levels and rate hike
expectations have been scaled back noticeably â€“ not just in the US, where the
Fed is in â€śwait and seeâ€ť mode, but also in the eurozone, where the central bank
has already signalled that it will raise interest rates to 4.25% next week.

Inflation
in the eurozone appears to have accelerated more sharply than expected in June:
according to the national data available so far, inflation could have increased
to at least 3.9% year on year. And if the oil price of over $140/b does not correct
soon, inflation could even rise significantly over 4% in the next few months.
This would be considerably higher than the ECB projection for 2008 (3.2 to
3.6%).

Partly
due to rising energy and commodity prices, business and consumer polls are signaling
that the economy is slowing down noticeably. The ifo institute indicates that
the business climate has deteriorated significantly in June, by 2.2 points to
101.3. The drop in the manufacturing industry was particularly striking.
Moreover, according to GfK, the consumer climate plummeted from 4.7 to 3.9. In
the eurozone as a whole, the climate deteriorated even more markedly: the EU
Commissionâ€™s indicator of economic sentiment fell by 2.7 points to 94.9, and is
now nearing levels last seen in the period from 2001 to 2003.

It
is practically a foregone conclusion that interest rates will be raised at the
ECB Council meeting next Thursday. In view of the recent developments, the ECB
will probably emphasize the

inflation
risks after the decision too. The hawkish tone is likely to be retained.
However, the latest climate and confidence indicators provide enough ammunition
for presenting the growth outlook in a slightly more critical light. Credit growth
to non-financial corporations was also weaker in May for the first time. The
ECB will therefore probably refrain from making any firm interest rate policy
commitments.

Stephan
Rieke +49 69 718-4114

Economics
Department

+49
69 718-3642

volkswirtschaft@bhf-bank.com

Foreign
Exchange Trading

devisenhandel@bhf-bank.com

JĂ¶rg
Isselmann

+49
69 718-2695

Matthias
Grabbe / Klaus NĂ¤fken

+49
69 718-2688

<i>This
report has been prepared by BHF-BANK Aktiengesellschaft on behalf of itself and
its affiliated companies (together "BHF-BANK Group") solely for the
information of its clients. The information and opinions in this document are
based on sources believed to be reliable and acting in good faith, but no
representation or warranty, express or implied, is made by any member of the
BHF-BANK Group as to their accuracy, completeness or correctness. Opinions and
recommendations are given in good faith but without legal responsibility and
are subject to change without notice. The information does not constitute
advice or personal recommendation, for which the duty of suitability would be
owed, but may facilitate your own investment decision. Moreover, you should
seek your own advice as to the suitability of an investment matter mentioned
herein. Investors are reminded that the price of securities and the income from
them can go down as well as up and that the past performance of an investment
or a market is not necessarily indicative for future results. This document is
for information purposes only. Descriptions of any company or companies or
their securities mentioned herein are not intended to be complete, and this
document is not, and should not be construed as, an offer to sell or solicitation
of any offer to buy the securities mentioned in it. BHF-BANK Group and its
officers and employees may have a long or short position or engage in
transactions in any of the securities mentioned in this document, or in any
related securities. This publication must not be distributed in the United
States.

Forex Trading News

Forex Research

Daily Forex Market NewsForex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
here.

Forex NewsReal-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."

Are you
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog

Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES
CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN
EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE
PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE
INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC
REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL
SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR
SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.